CHRIS UHLMANN: A single, means-tested childcare payment should replace the existing array of government subsidies to parents, nannies should be covered by the plan, and the Prime Minister's prized paid parental leave scheme should be tapped to help fund it.

Those are the key points in a more than 800-page draft of a Productivity Commission investigation of childcare out today.

And as Alexandra Kirk reports, it says making childcare more affordable and accessible will let an extra 47,000 parents to go back to work.

ALEXANDRA KIRK: The Productivity Commission wants to combine the child care rebate and the child care benefit into one payment and entirely means test it.

WENDY CRAIK: We're trying to suggest things that will make care more flexible, more accessible so that parents can get the kind of care they want in home, in a centre, you know, and they hours they want, at the price they want.

ALEXANDRA KIRK: Productivity commissioner Dr Wendy Craik says the government subsidy would depend on the type of child care and be based on what's considered to be "reasonable" fees, though the exact figures are yet to be determined.

WENDY CRAIK: It will actually operate as holding down prices. What we really recommend is cover the reasonable cost of care, including the small profit margin for operators, but not subsidise things like yoga classes or Zumba classes, or iPads and things like that.

The premium products, if parents choose to have those and pay for those, that's fine, they're not the things that the taxpayer should pay for.

ALEXANDRA KIRK: Families earning less than $60,000 would get a 90 per cent rebate of the deemed cost, sliding down to 30 per cent for households on $300,000 or more.

WENDY CRAIK: The way we've designed the subsidy, essentially more goes to lower income families, and there's more funding for children with additional needs. We do believe that it will make childcare more affordable. The share of fees paid by parents would reduce from 38 per cent to 30 per cent.

ALEXANDRA KIRK: The subsidy would go directly to the family's choice of approved services, and for the first time it would include nannies, but not au pairs.

WENDY CRAIK: Nannies would have to meet certain qualifications, like Certificate III, and the ratios would have to be the same as family day care.

ALEXANDRA KIRK: Controversially, the Productivity Commission wants to end tax concessions for not-for-profit childcare providers, arguing they create an uneven playing field. The draft report also suggests removing the cap from occasional care places and allowing child care centres to open longer.

Your proposals would add about $1 billion per year to the Government's bill, but only 47,000 more people would go back to work. That doesn't appear much bang for the taxpayer buck.

WENDY CRAIK: Yes, it is challenging to increase workforce participation and to encourage more people into work. More money is needed.

ALEXANDRA KIRK: The Assistant Minister for Education Sussan Ley supports more choice for care, such as nannies and welcomes the report.

SUSSAN LEY: I'm excited by it, it points the way ahead and I think for families, there's a promise of a future that's a lot less stressful than their current realities.

ALEXANDRA KIRK: But the Government is stipulating the overall cost of the childcare budget cannot increase, so the draft report suggests saving some money from the paid parental leave scheme, to bridge the funding gap.

But crucially, the minister says that's not an option.

SUSSAN LEY: No, it's not. The paid parental leave scheme is different policy. Governments can do lots of things with reports and let's see what the final report looks like in terms of many of the issues that we're talking about.

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